Stupid Bloomberg video: "1200 Model S Cancellations"

Why does the idiot on the right make some wild assertion that Tesla showrooms don't have/won't have cars in them?

Can the folks who are tracking numbers of reservations make any comment on the "1200 cancellations" info in the filing? How much of this is sig-to-p transitions?

Volker.Berlin |
27. September 2012

Even without arguing that number -- what's a cancellation rate of far less than 10% for reservations that started three and a half years ago? Life requirements change, personal situations change, financial situations change, and nobody really knew what exactly we were queuing for! That's more than sufficient to explain that kind of drop-out rate. Look at it the other way around: A conversion rate of around or above 90%, that's HUGE!

nickjhowe |
27. September 2012

+1 Volker

Vawlkus |
27. September 2012

I'm still betting that the 1200 is the number if deferrals, not cancelations. Even allowing for changes in lifestyle/etc, I don't believe there have been more then a couple hundred cancelations at best. What cancelations there are I'll more readily attribute to people having two reservations (one sig and one prod for example) and letting one go to pursue the other.

I just can't stand these idiots. They also leave no way to comment on their deceiving clips. He states, "2012 profits now off the table" I do not remember Tesla saying they would profit in 2012. I remember them saying they would make a payment on the load.

Then he goes on with why would anyone would "believe this company" then plays a clip,
Elon, "There are three things I am very confident of achieving...... That we would start production no later than July of this year (2012).... The second one would be that we would produce 20,000 cars in 2013..... Third is we would achieve a gross margin of in excess of 25%..."
Basically this guy is saying that since Tesla did not make the 5000 car hope that they will now fail at everything.

The claim of 1200 cancellations must be from the SEC filing, but it looked like 1000 to me. They were called cancellations not deferrals in the filing. The claims about profits being off the table in 2012 is also in there. The filing also warns about cash flow and the need to amend the DOE loan requirements to avoid default. Now I know what Elon meant when he said that the next 6 months would be tough.http://sec.gov/Archives/edgar/data/1318605/000119312512402293/d413621dex...

ColonyGolfer |
27. September 2012

I remember in the old days when the evening news was stretched from a 15 minute show to a half-hour. Hard to fathom all-day news shows. There isn't enough of importance going on to fill a full day, so you get non-newsy "news". I for one cancelled my reg S reservation and moved up to Sig S so I could get red paint. I'll bet I am in the "cancelled reservation" tally.

Mark K |
27. September 2012

News is supposed to be about facts without spin. Bloomberg News doesn't practice that.

The number of cancellations is a simple fact that is pretty normal as Volker explained well.

Bloomberg's timing and tilt are contrived to drive the stock lower to exaggerate the near term buying opportunity.

A news source that caters to traders is unfortunately motivated to maximize volatility so traders stay glued to the news.

Inflammatory headlines profit Bloomberg, so they do it.

michael.delune |
27. September 2012

Here is the actual text from the SEC filing, in quotes below.

I'm all for cancellations, because it just means I'll get mine sooner lol!

"As of September 23, 2012, our Model S reservations, after subtracting deliveries, were approximately 13,000, up from approximately 11,500 at June 30, 2012. The third quarter has been the strongest quarter in our history for new Model S reservations, totaling more than 2,600 to date. We expect that our quarter-on-quarter new reservations will continue to grow as we open new stores and services centers worldwide, have more Model S vehicles available for customer viewing and test drives, launch our Supercharger network, make lower priced versions of Model S available, launch Model S in Europe and Asia and as consumer familiarity with Tesla and the Model S continues to grow. Our new reservations for the quarter were partially offset by cancellations which increased as we asked the first several thousand customers on our reservation list to configure their cars for delivery or risk losing their production slot. As a result, we expect that total net reservations for the quarter will increase by approximately 1,600. We expect the cancellation rate to decrease after we work through the older reservations on our list and there is less of a gap between a customer placing a reservation, configuring the car and receiving delivery.

Even if we were to receive no new net reservations, we expect that it would take more than six months to completely work through our existing Model S reservation backlog assuming production rates remain consistent with our current expectations. We expect, however, that reservations will continue to increase for the reasons indicated above"

Brian H |
27. September 2012

+1 VB

Heh. On a "% per year" basis that might work out to about half that cancellation total, or 2%. So if reservations continue to grow at 1260 per month (the rate since the start of July), less about ½ (5 months worth) of 2% of total reservations, that makes about 19K reservations +/- 190, less ~3K deliveries, =~ 16K reservations remaining by Dec. 31. About 3K more than now!

And, of course, it is likely reservations will be substantially higher than that. IMO.

jat |
27. September 2012

My wife and I sell hand-made board games in our spare time, and we have a backlog of over a year at the moment. I can definitely attest that the cancellation rate goes up the longer the time between when the order was placed and when it comes up for production -- and that is talking about products averaging less than $100.

I agree, nothing to see here. If new reservations started to drop below cancellations, then I would worry.

jerry3 |
27. September 2012

And 1200 cancellations over three years isn't surprising. Actually, it's surprising that it isn't higher. Three years+ is a long time.

sergiyz |
27. September 2012

They are talking about cancellations in the last month.
While we're tesla supporters, thinking the reservation rate keep growing at the current rate is probably overly-optimistic.
The price has to drop, the cars should be delivered in under 6 months with no further delays.
It's a tough job to do, but unless Tesla do it, they'll go under.

There's another issue they've missed in the report - Daimler deal that's apparently still up in the air:

"In the third quarter of 2012, we anticipate that our gross margin will be negatively affected primarily by the limited number of Model S vehicles we intend to deliver, the consequent allocation of all manufacturing and labor overhead costs across a smaller number of vehicles, manufacturing inefficiencies, higher costs for initial parts, and the delay of development services revenue from Daimler, resulting in a negative gross margin in the range of 15% to 18%. Revenue from Daimler will be recognized when we reach final agreement upon the development milestones and related payments which we anticipate finalizing in the fourth quarter of 2012. In the fourth quarter we expect gross margin to improve substantially and turn positive mainly due to higher Model S volume, as well as cost efficiencies and planned cost reductions. "

mw |
27. September 2012

Go ahead let them spin negative, gives me a chance to pick up some more stock for $27/share. I'll be laughing at them when the stock hits $50+. Yes the next 6 months will be tough for Tesla... growing pains. Elon has saved the company from near death before. Tesla doesn't have a demand problem they have a supply problem. I'm doing as much as I can by buying a car. The world needs this company to succeed.

Brian H |
27. September 2012

jerry3 | September 27, 2012

And 1200 cancellations over three years isn't surprising. Actually, it's surprising that it isn't higher. Three years+ is a long time.

Come to think of it, it's sort of a mixed bag. The "raw" reservations at Sept end is about 17,000, so the total cancellations over the whole period is about 4,000, of which 1,200 are "new".

@sergiyz;
You make some good points, but I doubt very much the price will drop. Unless you see a big drop in demand ahead. What would cause that?

And as far as "going under", I think EM now has a much bigger hat to pull rabbits from than he did previously. If he chooses to, which IMO he would. He's now worth about $3 bn, and both SpaceX and SC are already profitable.

Brian H |
27. September 2012

Corr; blew the tags.
jerry3 | September 27, 2012
.
And 1200 cancellations over three years isn't surprising. Actually, it's surprising that it isn't higher. Three years+ is a long time.

Come to think of it, it's sort of a mixed bag. The "raw" reservations at Sept end is about 17,000, so the total cancellations over the whole period is about 4,000, of which 1,200 are "new".

sergiyz |
27. September 2012

brianh@
What I meant by a price drop is TSLA shipping smaller battery sizes.
They are only shipping 85kw at this point.
While they've planned to start shipping 60kw in Nov, that's probably at least 5 weeks behind now.
Yes, Elon has a bigger hat, but he's also running SpaceX that is not exactly profitable either.
They could use some good news, e.g. Daimler that generated 15%-18% negative margins could instead be a finalized deal with positive margins.

Brian H |
27. September 2012

Actually SpaceX is very profitable. It has made a few commercial launches, and will make its 1st NASA cargo launch at full price to the ISS Oct 7. It has the largest commercial launch contract ever signed, with Iridium for $485 million, 8 launches over 5 (?) yrs. Etc. 44 launches on its manifest, now taking the lion's share of new contracts because its pricing is so good, and takes payment only if successful. Game-changer.

Ron5 |
27. September 2012

When you figure the percentage of cancellations you really have to weight it considering the number who have been forced to finalize. Sure, some people may have canceled before they had to, but I'm sure most of the cancellations came when finalize time arrived. The relevant number is higher than 10%.

They are not a public company, so it's hard to get solid data on them, but they do have some contracts and claim to be cash flow positive.
Private company valuations are really hard to judge, and I imagine the R&D costs are high, probably more so than tesla.
I remember after the first successful launch Elon was talking about it and said they had two attempts and if the second one didn't work they wouldn't be able to try again.
That was back in May.

Brian H |
28. September 2012

But the launches in question were in 2006.

MandL |
28. September 2012

+1 Vawlkus

We made our Sig reservation last November and when pricing came out made a regular reservation to cover our bets. Cancelled the regular one after we finalized configuration of our Sig. I know we're not the only ones to do this based on what I've read here.

walla2 |
28. September 2012

I also upgraded to a Sig in May/June of this year. I cancelled my #2405 production reservation. The good news is all the productioners moved up. The bad news is that Bloomberg counted this as a "cancellation" and hit the stock.

bp |
28. September 2012

While delivering a small number of vehicles is a good step forward, until they can deliver vehicles in volume AND those customers can give positive testimonials, Tesla will remain at risk.

The cancellation rate is actually higher than 10% because the cancellations are probably mostly among those reservation holders that were among the first 5000+ reservations - so it's more likely closer to a 20% cancellation rate.

But that shouldn't be surprising. These are the oldest reservations - based on what people thought they would see from Tesla at this point. For many people, this could be the most expensive vehicle they've ever purchased - and we are still in a challenging economy - so even a 20% cancellation rate, among reservations that were probably made a year or more ago - shouldn't be surprising - and actually might be a positive sign, in that the cancellation rate very well could have been higher.

And, I'll be honest, while I'm enthusiastic about the potential for the Model S - I'm still not 100% committed. My delivery probably won't happen until March/April - and by the time I have to commit - there will be thousands of customers with Model S - and it will be more obvious how well Tesla is fulfilling their vision of building a high quality car.

Once Tesla is manufacturing in high volume - and they continue to have positive feedback from their customers - and continue to see new reservations - then the stock price will have real meaning. Until then, the price is more speculative - and will be more reactive to any small positive or negative news from the company...

roseland67 |
28. September 2012

Interesting,

I just attended my local AEE/IEEE chapter meeting last night
@ the Oak Brook, Ill Tesla store.
There were multiple people in the store, a Model S platform and
a new White Model S, (charging), in the showroom.
As with most start ups, there will be growing pains, certainly financial ones as we are seeing now.
This company is not run by accountants, bankers and lawyers, it is run by engineers and visionarys.
While Tesla is a slightly different model than "business as usual" is used to seeing here stateside, I full expect the existing technology hurdles, (energy density, charge time etc), to be overcome, the financial hurldes may be more difficult.

In Chicago, I wait anxiously, with great anticipation

Brian H |
28. September 2012

bp;
Based on this and that and hunches, I suspect that Fremont is awaiting resolution of some of the supplier issues to finish off nearly-complete cars which it is "setting aside" in waiting. Elon said the supplier issues were for fiddly things, not affecting the chassis, drive train, etc.; mostly (entirely?) 'fit and finish' stuff.

It is thus possible that a "logjam" may break at some point in the next couple of months, give or take.

Brian H |
28. September 2012

roseland;
Fascinatin'! What inspired the enjinears (sp?) to meet at that store? And did y'all interact with the staff and/or looky-loos? Tell all!

sergiyz |
28. September 2012

They state in the SEC filing that they have a single source supplier for some parts, probably a significant number.
That's definitely a risk, especially for the ramp up.

Brian H |
28. September 2012

sergiyz;
Indeed. The flip side is that getting one or two (?) up to speed might do the trick. Hoping ...

roseland67 |
28. September 2012

Brian H,
Usually we meet for lunch in the mall where the store is located.
Apparently, the chapter head decided this would be
an enjoyable diversion from the same old vendor presentations,
it was very well received.
The Tesla employees were engaged all night answering questions
and were very helpful.
The Model S on display always seemed to be occupied.

Overall, an enjoyable experience.

Brian H |
28. September 2012

roseland;
Supercalif...etc.
Are the bulk of/all the members EEs? Would have loved to eavesdrop (lunch→night?).

roseland67 |
28. September 2012

Brian,

Most are EE or engineers of other disciplines.
The questions that they asked were typical of the ones
that have been asked on this forums for years,
nothing unusual.

TikiMan |
29. September 2012

Yup, 1200 cancelations is actually really low, considering how much has changed with the economy over the last three years. I am fairly sure there were also many who assumed that they would have a $50k Model S in their garage by now, and weren't willing to wait. Also, a lot can change in ones life in three years, and I am sure some deposit holders may have gone from a long distance commute to a short one. Still others might have expected something different after the Betas were released.

Either way, as more and more new folks hear about Tesla and the Model S (and X), they are gaining new ground everyday. I also believe that many of these stock speculators are not aware that the person responsable for much of this car and it's company is also the same person who is starting to make even the late Steve Jobs appear to be just an avarage CEO. Steve jobs never launched rockets into space (neither did Bill Gates for that matter).

My money is on the guy who hangs with NASA!!!!

Brian H |
29. September 2012

Elon is fortunate to have to deal with NASA only as a supplier of a service NASA is no longer able to provide itself. Between Congressional and Administration jerk-arounds, and internal (partial, but significant) power-grabs by the paper-pushers, and smearing of its activities into areas where it is a fish out of water (climate and Muslim outreach), NASA is a geriatric stroke victim compared to what it could and should be.

jerry3 |
29. September 2012

Brian,

Agreed. It's not the NASA engineers that are hampering it. It's the administrators and politicians.

Timo |
01. Oktober 2012

I bet that if ISS was not there already, SpaceX would build one in order to have something to dock their Dragon spacecrafts.

Elon has promised to put man onto Mars in ten years (nine years now). If he can deliver that promise its a lot more than anybody else is doing (when it comes to space exploration).

I'm not a rocket scientist, but I think Mars-rocket needs to be build on orbit. Spacecraft that never needs to go down in gravity well can be as large as we want it to be, so it would make sense to build that one on orbit, maybe as extension to ISS at first: it needs to be build like space station anyway, trip wont be short (unless we get warp engines a lot sooner than we expect), so people need to actually live in the ship.

Let Elon put 5,000 people in their cars first ;)
One small step at a time...

Brian H |
01. Oktober 2012

Timo;
An ion drive, or VASIMR drive, would take ~20-30 days, and there's a "continuous shuttle" system that would take (IIRC) about 6 weeks. Both are strictly spacebound, of course; as they say, getting to orbit is halfway to anywhere in the Solar System.

Elon's re-usable boosters would take care of the cost side of that, which means de facto all significant issues.

Vawlkus |
02. Oktober 2012

We need a thread to talk about that Brian, here is not the place to go into all the space flight ideas I have :P